Step-by-Step guide for first-time homebuyers in Canada in 2021
We are going to cover 6 things that first-time homebuyers must do in 2021. Making your first home purchase in Canada can be a challenging task. Having to cope with finances, fees, and the recent increase in housing prices may make you feel discouraged. According to a recent study conducted by the Royal Bank of Canada (RBC), more than a third of non-homeowners under the age of 40 believe they would never own a home, and 62 percent of Canadians believe that the majority of people will be priced out of owning a home in the next decade.
We at mortgage visions help our clients to make this process smooth. Here is a step-by-step guide for first-time homebuyers in Canada.
1. Examine your financial circumstances
Buying a home for the first time has advantages and disadvantages. To be prepared, you must first examine your financial situation and determine what you can and cannot afford. Purchasing a property will incur additional costs that you may not be aware of at first. You may wish to establish a thorough budget to see where your money is going now and how it will appear with the added costs of homeownership. Check out this calculator from the mortgage visions to assist you in making that selection.
You should also consider what resources you have to deal with the additional costs that come with owning a property. It could be in the shape of extra savings you’ve set aside (rather than utilizing them as part of your down payment) or even family members who are willing to assist you with your down payment (there is no shame in asking your loved ones, especially as a first-time buyer).
If you find that making the required 5% down payment and regular mortgage payments are consuming all of your resources, don’t be afraid to take a step back and put off buying a property until you can free up more cash in your budget.
2. Make sure your purchasing decision is right for you now and in the future
The property you purchase should be something you can appreciate not only today but also as your life evolves. It’s critical to consider your long-term goals carefully. Examine where you’ll be most comfortable today and in the next five years without discounting what the future holds.
If you want to start a family, consider how you’ll pay for daycare or how much money you’ll lose if one of you decides to stay at home. How dependable is your income, and what would you do if unexpected circumstances, such as COVID-19, arose? Is a Sunday afternoon commute as manageable as a Monday morning commute?
3. Pre-approval is required, and an alternative mortgage lender should be considered
Pre-qualify first, then begin house seeking to minimize disappointment. Pre-approval is frequently contingent on your credit score, a thorough examination of your income, and the form of your down payment, among other things. Does it appear to be difficult? Don’t get worked up! You can accomplish this through a bank or a mortgage broker, among other options. Finding a reputable lender, on the other hand, is one of the finest options for first-time purchasers.
In short, keeping your choices open while applying for a pre-mortgage approval is advantageous. Make sure you do your homework and figure out which option is ideal for you.
4.Teaser rates should be avoided!
If you’re buying a first-time buyer, it’s a good idea to brush up on the current real estate market. Teaser rates are included in this. Teaser Rates, sometimes known as adjustable-rate mortgages, have been linked to financial difficulties and housing crises, such as the one that happened in the United States. According to Adam Major of Georgia Straight, “between 30 percent and 40 percent of all mortgages sold in 2005-2006 were ‘teasers,’ where the rates started low but went up after two years.” Buyers discovered that after the rate hike, they could no longer make the payments. And, as the value of their homes declined, they were unable to refinance their mortgages.
5. Use government assistance, such as the First-Time Home Buyer Incentive, to your advantage
You are entitled to new privileges and incentives as a first-time homebuyer. So why not make the most of it? Updates to the BC government’s First-Time Home Buyer Incentive went into effect in early May 2021. The Department of Finance and Canada Mortgage and Housing Corporation (CMHC) has improved the eligibility requirements for buyers in Toronto, Vancouver, and Victoria, about five months after it was first proposed.
6. Continue to save by making a savings plan!
Your down deposit and monthly mortgage payments are only the starts of your home-buying adventure. Closing charges, land transfer tax, and home insurance are just a few of the additional expenditures associated with purchasing your first home. That’s why, even if you have enough money for a down payment, it’s a good idea to save as much as you can. The larger the down payment, the lower the mortgage and interest payments will be! You could also consider setting up an emergency fund to assist you to plan for any unforeseen expenses. Setting aside 5% of your salary as an emergency fund to be ready just in case is a fantastic way to offer yourself some peace of mind.
“Wow, getting a mortgage is going to be more difficult than I expected,” you may be thinking. But don’t worry, Mortgage visions can assist you! Borrowers receive direct access to a pool of lenders and experience a substantially faster mortgage approval rate with our straightforward application, making the process smoother and faster for first-time home buyers.
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